It shouldn’t be any surprise that the Utah “Taxpayers” Association can’t quite bring themselves to stick to facts, instead resorting to the time-tested tools of fear, uncertainty, and doubt to prop up their weak cases. In the July newsletter, the UTA decides once again to lay into UTOPIA and directly address some of my points on defining UTOPIA’s success. Unsurprisingly, they very much missed the mark yet again.

UTOPIA says they told the UTA about the bond issues back in December. UTA chose to sit on the information until it was politically convenient to run with it. They can pretend not to have known about any bond issues until now, but UTOPIA reps say otherwise. If the UTA is really looking out for taxpayers, why would they have sat on this information for over 6 months?

Savings generated by UTOPIA’s customers do not reflect UTOPIA’s success, any more than the con-sumers [sic] who saved by buying a DVD player at Circuit City rather than Best Buy reflected Circuit City’s success: Circuit City is still bankrupt.

The analogy here doesn’t make one lick of sense at all. If a consumer saves $10 per month in telecommunications costs because of the presense of UTOPIA, not necessarily because they subscribed to services over the network, and ends up paying $6 per month in new property taxes to support it, are they not up on the deal? I may not have some fancy title to my name, but I do understand basic math and I do know that 10 minus 6 is still a positive number. How does the UTA figure that there is still a net loss to each household in the served cities? I’d like to see that math.

For example, FreeUTOPIA notes, Provo and Orem claim using the municipal telecom network saves them several hundred thousand dollars per year. There is substantial reason to question these claims. As vocal supporters of municipal telecom, they have a vested interest in these claims.

Maybe so. But it also happens that this claim was made in the consultant’s reports to Provo City and in the rebonding hearing in Orem on 5/2/2008, respectively. Both claims can be very easily verified by asking for the budgets of the cities before either network was built and comparing. The UTA can very easily do this legwork to prove or disprove the claims. They have either chosen not to do so for fear that it will be proven, or they have done so and don’t want to be proven wrong. In either event, their actions only lend strength to the claims even if they choose to pull a Mandy Rice-Davies.

UTOPIA and backers like FreeUTOPIA also point to the “level of competition” UTOPIA creates. By this theory, UTOPIA lowers the price and increases the service all customers receive, not just those who purchase UTOPIA services.

When cities build and operate their own golf courses, they are subsidizing one recreational activity at the expense of everyone who doesn’t golf, not lowering the cost of golf or increasing golf service.

UTA again misses the mark entirely. Golf courses are not an open infrastructure to be used by private companies to provide services. They are a vertically integrated monopoly of both facility and service. UTOPIA provides the facility and expects private companies to figure out how to provide a service. Many of them already have with great success. Additional companies are signing on to provide services via UTOPIA on a regular basis.

And now where the UTA goes off into Crazytown:

And if government creating competition by providing the service directly is good for telecom, why stop there? Why not have the city sell legal and accounting services to the public? Certainly those are critical goods that every business and taxpayer needs. And given the reputation of lawyers and accountants, it’s clear that most people want better legal and accounting services at a lower price. Cities could “increase competition” by providing these, and any number of other goods and services. It’s hard to believe UTOPIA and its backers will be asking cities to form municipal law and account-ing [sic] firms.

Again, we see an analogy that has very little to do with, well, anything. By engaging in absurdly extreme examples of government-provided services, the UTA has only managed to harness a level of crazy normally reserved for talk radio. Whether the UTA likes it or not, telecommunications has been deemed a critical service for purposes of public safety and economic development. That’s been the way it has been for a hundred years. We chose to develop this critical infrastructure by pouring money into incumbents and shoring them up via exclusive franchise agreements and regulation that discourages new market entrants.

Waitaminute… that sounds suspiciously like government choosing which private enterprise will succeed or fail, yet the UTA is deafeningly silent on this matter. Is it possible that they support the corporate welfare of the Universal Service Fund, exclusive franchise agreements, and cumbersome build-out requirements? Given the money flowing from incumbent providers to their coffers, I’d say that all signs point to yes. The UTA needs to revisit its own hypocrisy on supporting “free” markets.

When government builds a road, why isn’t the UTA protecting us from government monopolies? Why aren’t they cheering for private companies to deliver the roads? In fact, they don’t even think roads are a function of local government!

So roads, water, sewer… those are all outside the “proper” role of city government? Based on this statement, the UTA seems to think so. This would explain why when a city attempts to build a 21st-century road, a fiber-to-the-premises network, they are up in arms. Yet where is the outrage over government monopoly on these other services? It is conspicuously absent. Indeed, something more is at play here.

Everyone who has fol-lowed [sic] this story knows UTOPIA’s cities may have to pay as much as $504 million over the next 33 years.

May. In a worst-case scenario where UTOPIA can’t make any of its bond payments from revenues. A scenario that everyone but the UTA is certain isn’t likely to happen. When UTOPIA’s budget and finances become public this month, we’ll see how short they are. If the UTA continues to tout the worst-case scenario at that point, once it is proven to not be the case, they are doing nothing but fear-mongering with zero basis in fact.

Because these cities only have authority to increase their property tax revenue-they can’t raise their sales tax rate, and they can’t raise personal spending-replenishing these pledge accounts means either a cut in services or higher property taxes.

Sure, they may have to raise property taxes to cover the shortfall. The question, though, is if those property owners are going to end up paying more in property taxes plus telecommunications costs or not. Orem is saving enough on telecommunications costs to pay for half of their pledge. The average telecommunications bill per household is around $200 per month. If we assume even a 5% reduction in bills due to competitive pressure and 30K households, Orem residents are saving around $3.6M per year in telecommunications costs or more than $300K per year more than what the full bond payment amount is. Granted, I’m doing some extrapolation, but I’m also using a VERY low-ball figure. So even if property tax rates have to rise, residents are still up on the deal.

Because UTOPIA is a government entity, it does not pay property taxes.

I’d like to see what kind of property taxes the incumbent providers are adding to the tax base. Because, again, residents may be up on the deal even in a worst-case scenario. Let’s crunch some real numbers instead of using vague statements.

Even worse, by not paying property taxes, UTOPIA lowers the amount of money Utah has to spend on education. In a state that is already lowest in the nation in per pupil spending, UTOPIA is adding insult to injury.

Uh… didn’t the UTA recently claim that increased per pupil spending has had little-to-no effect on education outcomes? In fact, they did so in their May newsletter. Either they have had a change of heart in very short order or, again, they are showing glaring hypocrisy. I vote for the latter.

UTOPIA and its backers also argue that your Taxpayers Association ignores the economic stimu-lus [sic] UTOPIA offers. They share anecdotes about companies who stayed in or moved to a UTOPIA city because of UTOPIA.

It’s more than anecdotes. Flying J moved their corporate headquarters out of Brigham City specifically because of a lack of broadband. That move cost the city millions in lost revenues and was the driving factor in deciding to join UTOPIA.

The UTA has demonstrably distorted reality throughout their entire grammatically-challenged diatribe without offering a single concrete solution of their own, much less acknowledging the sad state of telecommunications in this country. They do nothing to advance the dialog with their ill-informed half-truths and instead provide only screaming inconsistency tailored to appeal to emotions rather than cold, hard facts.

Let it be said that I challenge any representative of the UTA’s choosing to a public debate on the status of telecommunications in this state and in this country. Like UTOPIA’s Todd Marriott, I challenge them to provide input in the discussion instead of sniping from the sidelines for their overlords at Qwest. Most of all, I challenge them to stop using fear, uncertainty, and doubt as their only tool and instead discuss the facts, even the ones that completely fail to support their case.

P.S. If you doubt the Qwest and UTA “relationship”….. what confirmed it for me is when Jerry Fenn and Royce Van Tassell are “bumping fists” at the end of a City Council meeting where they both attempted to shoot down UTOPIA. Thanks for nothing UTA, your opinions count for nothing in my book…. you guys need to re-evaluate what you stand for.

I really don’t see how UTOPIA has lowered ANYONES’ bill. QWEST, Frontier and Comcast are all national companies. They set their pricing on a national level. QWEST and Frontier both have the same pricing for their high speed internet in Utah, Minnesota and all the other states they operate in. So how did UTOPIA “drive down” prices that customers pay?

Jack: Customers in UTOPIA areas get offered special promotional rates. At one point, Comcast was offering a $75/mo triple play. Call up Comcast from a UTOPIA area and mention that you’re considering it. They’ll give you a special rate just like that.

I can get special “promotions” that are offered in Utopia city’s and no where else. Comcast’s alchemy package for example, We have gotten door to door salesmen from both company’s offering special these promotions which ether ties you into an extended contract of 2years. Just because the price listed on Qwests or Comcasts web page is the same does not mean that the price available to you match’s their national price.

One of the reasons that Utopia has made address lookup’s more difficult is that Comcast was using this to determine discount promotion availability. That sounds like its lowering someone’s bills to me.

Further Utopia customers Don’t pay the into the universal service fund that Qwest blatantly over charges on, And has been sued and fined for on multiple occasions.

I’m sorry to say I agree with much of what the UTA is saying…which bothers me to no end as I believe the UTA is little more than a “front” for the businesses which are it’s members. In the case of UTOPIA they are moving their lips but you can be sure Qwest or Comcast is funding the speech.

But they have been right on many points about UTOPIA.

I do not believe the cities claim of getting hundreds of thousands of dollars in value or saving each year. I know the “consultants report” suggested that, but if you read the reports you will see much of that is in potential future savings on things like meter reading, etc., which the cities have paid for the right to do, but are not doing.

You must also take into account who was paying for the report and what they were told to look for. It’s not an independent assessment of the savings. Perhaps they are there, perhaps not. Since the savings claim was made by the cities they should be the ones to detail those saving so anyone can review the numbers. I’m willing to bet those claims cannot hold up to a careful review.

As far as the “consumer savings”, that too will not hold up. I do believe there ARE consumer savings….but they are very limited in scope. The general rates are NOT lower in our communities than others across the nation. There ARE consumers that save, but the actual number of consumers getting a lower rate is a small percentage of the population. IF you contact Qwest or Comcast and say you will disconnect and go to UTOPIA (or any non-municipal provider?) you might get a special promotional offer. But what number of people are getting that savings and how much is the total? Much lower than suggested by UTOPIA supporters. You surely CANNOT assume ALL residents are saving….only a very small percentage are saving….at the expense of all residents.

I believe competition lowers prices, but much more so if the competition is wide spread (which UTOPIA is not) and much more if the competition is offering a promotional offer itself that is killer. Like you see from a strong competition that can offer free installs and special low rates…things UTOPIA can no longer do.

I believe UTOPIA cities will be called upon to pay the full amount later this year (Sept.-Nov.). UTOPIA’s budget suggests they are NOT covering operating expenses with existing revenues. Utopia revenues per subscriber appear to be somewhere around $27 a sub in the budget.

Revenue is budgeted to increase only 10% with a 100%+ increase in customers??? How is this possible? (Could this be the really deep discounts they need to attract customers?)

Salaries are increasing 20%+ (Are they adding even more people and paying higher wages/benefits?)
Professional Service are increasing 200%+ (A quarter of a million in “consulting”, and $180,000 in lobbyists.)
Network Management Cost are increasing by 50%

The total dollar amount of the salaries increase ($415,000) is just about equal to the total revenue increase ($478,000). So where will the $865,000 increase in Professional Services come from?

I have heard from a reliably source that cities will have to come up with month this year, likely in Sept, Oct. or Nov.

We will know more when UTOPIA releases it’s 2009 year end actuals. I currently only have the 2009 budget to go off and compare to the 2010 budget.

Bottom line…they expect to have 22,900 customers and have revenues of $5 million, but their interest payment is over $15 million. So they need more than 3 times the budgeted number of subs/revenue just to make the interest payments. Their operating expenses appear to be $7 million?

Like the UTA, I’m just not seeing much light at the end of the tunnel.

Capt: Determining whether or not a city is saving money by using UTOPIA should be a pretty simple exercise. Just go down to the city and ask for their telecommunications bills from both pre-UTOPIA and post-UTOPIA years. The UTA could very easily have done this and proven their claim, but they chose not to do so. The onus is on them to prove their claims to the contrary.

It’s also been very clearly demonstrated that competition is good for all consumers. The survey cited in the GigaOm article I linked demonstrates that more providers means lower average monthly bills by a rather substantive margin. Since incumbents have to guess as to where UTOPIA is located in member cities, they end up having to offer the special UTOPIA price to the entire service area. Go ahead, Capt. Call up Comcast with a service address in, say, Murray, then call back with an address from Taylorsville. I’ll bet you can end up with two different prices.

Installs and promo pricing are just smoke and mirrors. If UTOPIA focuses on total cost of ownership (TCO), they always end up ahead. I think they need to change the discussion to put Comcast and Qwest on the defensive for costing more money over time and having a big bump in pricing after a few months. Free installs and promo rates only matter because incumbents talk about them all the time and make them matter. It’s time to show that the emperor has no clothes.

UTOPIA probably needs those specialists to crack into new markets. There’s a lot of opportunity in doing wireless backhaul (a market that has, quite honestly, been exploding) and UTOPIA isn’t quite sure how to cash in on it. Wouldn’t it be nice if they had a cell pro in there nailing down deals with Clearwire, Sprint, Cricket, etc.? The broadband stimulus package also presents a lot of interesting opportunities, especially since UTOPIA meets and lot of the criteria and would move to the head of the line because of previously approved RUS loans. Shouldn’t they have a professional on-hand to make sure it doesn’t go south like last time should they choose to apply? It’s better for UTOPIA to spend a bit more on staff if it means a significantly better payback down the road.

Bear in mind that the market served by service providers, while very visible and extremely important, does not represent the Big Money. UTOPIA has built up their network in such a way as to properly support 10GbE long-haul transport between Salt Lake City and another major POP. That has already attracted some rather big names and I imagine was a deciding factor for Integra (who, by the way, is aggressively marketing and has forced Veracity to be even better than they are). I’m not really at liberty to discuss specifics, but as someone who’s looked inside of the black box, I’m sure that UTOPIA still has some big tricks up its sleeves.

27$ per sub seems really really low something tells me this is off. in the layton meeting before the rebonding they made the claim of 46$ per sub i don’t see how this could have gone down that much, unless they lost every double play/triple play and business customer.

I think I calculated a number about $46 based upon the numbers they released last year (after claims of avg. revenue per subscriber of $60-$80+ by others on this list).

I do find it interesting that last year they released a breakdown of the revenue category and this year in their budget there is a single line showing revenue with no breakdown or detail? Perhaps the info provided to the State Auditors Office will require more detail?

But the $27 is the new number based upon the numbers they have released. They are showing they will add about 12,900 customers this year and their revenue will increase by only $478,000. That is only an avg. of $3.08 per sub per month. ($6.16 a month when you spread the installs over the year evenly.)

Perhaps they plan to offer deep discounts in order to attract new customers (which is what they would have to do and is something I support), perhaps (more likely?) this is tied to the fact that there are zero dollars in the budget for installations or customer premise equipment (fiber portals, set top boxes, etc.), they may have a plan that charges the customer (or service provider) for the install (perhaps as much as $1000 or more or as much as $6000 using the Special Assessment 20 year lien plan) and then they will offer service for a very, very low rate, or at least UTOPIA’s share of the rate will be very, very low?

Note: I think they will have to gain fewer customers to make the budgeted number of 22,900 as I suspect their end of year numbers will show more than the budgeted 10,000 customers? They are budgeting to add about 1000 new customers per month…with none of the installs or equipment paid for by UTOPIA?

12,900 customers this year? Not counting holidays (only subtracting saturdays and sundays), this means they would need to do over 51 installs per DAY from now until July 9 2010. Or is this 12,900 by the end of 2009? If so, that number goes up substantially.

Have things suddenly changed? When I was involved with the project, at its peak I think we did 30 installs per day (on a busy day), and it dwindled down to < 8 per day before UTOPIA ditched PacketFront (and when I left).

Does UTOPIA (And the ISPs) have the install crews to do 51+ installs per day to mean the 12,900 new subscriber goal?

Maybe 12,900 is the TOTAL number of subscribers that will be on the network? 12,900 added in 1 year is a pretty steep ramp up compared to this time 1 year ago.

I don’t doubt telecommunications bills are lower with UTOPIA, I do question the amount of total savings. I have reviewed the consultants report from Provo (in some detail) and there is a bit of smoke and mirrors there, including some future savings as I mentioned, that only materialize if the city spends millions more to move to using the fiber network for meter reading, etc.

I agree that IF you MENTION that you might go to UTOPIA (or Broadweave or Qwest) you have a good chance of getting a lower price. But if you sign up using the internet (as many new customers do) or call and give those addresses without any mention of a competitor, I think you will pay the standard rate. It just does not make good business sense (and Comcast has good business sense) to give discounts to customers you don’t need to.

The “discount” everyone will get is the “promotional offer”. I agree that this is very misleading and may not save you money in the long run….BUT IT WORKS!!! Comcast has had a promotional offer of one type or another going for years….almost uninterrupted, just changing the name and the offer. But they are very successful and try to change the public perception as you may…people will continue to “take the bait”. Accepting the short term gain and accepting the long term pain. It’s sort of the American Way…including what both individuals and our government do with their budgets, etc. It’s smoke and mirrors, the emperor has no clothes…but it works and will keep working. What UTOPIA lacks is the smoke and the mirror…sadly, it matters.

So I don’t question that there ARE saving. I suggest that the UTA is minimizing those savings and the cities are maximizing those savings and the truth is somewhere in the middle.

As far the significant expense increases in the UTOPIA budget and perhaps needing those specialists to bring home the bacon…when I ran operations, if I budgeted expenses for specialists to sign on big accounts, my boss would expect to see an increase in revenue to offset those expenses. This budget looks like you are adding staff but not seeing a corresponding increase in revenue. If I increase my spending on marketing or sales (or anything?), I better see an increase in revenue to show that spending was getting the desired results. I don’t see that in this budget?

I’m not sure how I feel about UTOPIA “building their network to provide 10Gb connectivity between SLC and another POP”, when the majority of the citizens that will be paying the bills in so many UTOPIA communities do not even have access to UTOPIA.

Apparently this great increase in revenue from these “big” accounts will NOT take place in 2010 as the revenue increase from 2009 to 2010 is only 10% (with a 100% increase in subscribers).

At what point do you require UTOPIA to pull those “big tricks” you talk about, out of their sleeves and place them on the bottom line? When do you say “The Emperor has no clothes!” about UTOPIA?

Personally, I feel “IF” UTOPIA can not even cover their operating expenses with revenues it’s time to pull the plug or at least force them to tighten their belt to the point that revenues cover operating expenses.

That would be a gain of 12,900 in 2010 if they only had 10,000 at the start of the year. As mentioned, I suspect they ended the year with more subs. Perhaps 12,000 or as many as 15,000?

The result is the same, they would be budgeted to install at a rate as high or higher than they have ever done before for a sustained period of time they have never done before….while having no money budgeted for install costs or customer premise equipment?

Making it even more unlikely to happen…they will NOT be marketing to new construction areas as they only have 700k in construction budgeted. Compared to 3 million plus last year and 12 million + the year before.

There is no question that marketing to new areas in much easier than selling to existing areas.

“IF” they had 15000 subs at the end of June, they would still need to add 658 subs a month in 2010 (33 a business day)? That would mean they should have added almost 200 so far this month?

Anyone seeing a naked emperor?

Of course….IF the SAA plan is successful and thousands of home owners are willing to place a lien on their home to cover the install costs in return for lower service costs…things would be different.

Or…I guess if Traverse Mountain hitched their star to UTOPIA (a questionable action at best?) that could bring the sub numbers up significantly without install costs or generating much revenue for UTOPIA, explaining the budget abnormality? (Two key UTOPIA employees do live in this development.)

So lots of things could happen, but still not change that UTOPIA plans to generate about $5 million in revenue this year and has operating expenses of $7 million and interest payments of $15 million.

Capt: UTOPIA’s move to extend its long-haul network is good news on multiple fronts. For one, it means attracting more long-haul customers such as Tier 2/3 service providers or application providers looking to connect to remote locations. It also allows more service providers to offer services on the network much more easily. Finally, the revenue will end up paying to build out the residential market. I see this as a good strategy to make money first, then build later. UTOPIA does not have the luxury that Provo did of building in a highly-focused area using a lot of existing plant and resources to get the job done.

UTOPIA definitely suffers from a focus problem. They had to build a plant that supported cities spread over a 132-mile stretch, then figure out how to build a little bit in each city in such a way as to pay for the remainder of the network and appease each city council. (There’s always been a certain amount of selfishness and I don’t think the cities have, collectively, done a good job of thinking about the project as a whole.) I don’t think that covering only around 1/3 of residential neighborhoods is going to do it. When you can easily set yourself up for a grand slam, why try getting there with a bunch of singles? Some of the long-haul customers they’ve gotten are worth as much as a thousand homes. It’s not the best PR, but it makes financial sense to get 13 whoppers instead of 13,000 chum fish.

Personally, I expect to see significant results by Q3 2010. I know it takes time to negotiate with the larger customers and service providers (Integra took almost a year), so I’m willing to give them some breathing room to wrap up those deals. If there isn’t a significant improvement in cash flow by then, it would be time to demand some big operational changes.

“UTOPIA says they told the UTA about the bond issues back in December.”
This same ‘ole song and dance is getting old people! Need anyone be reminded how many times the new regime consisting of MarryLot & Pantyliner have ‘misled’ and been less that upfront with what is going on there internally? Although valid points all regarding UTA, the opening idea that we can now take UTOPIA @ face value is ridiculously out-of-line.
“Have things suddenly changed? When I was involved with the project, at its peak I think we did 30 installs per day (on a busy day), and it dwindled down to < 8 per day before UTOPIA ditched PacketFront (and when I left).
Does UTOPIA (And the ISPs) have the install crews to do 51+ installs per day to mean the 12,900 new subscriber goal?”
This is awesome! I might have been there too when it was 30+ installs daily with a crew size of 40+ ppl. Nowadays, it is nothing close..Yes this means that I know. Techs are going home early and/or only have maybe 2or 3 jobs per day but not consistently week end week out. Yet more propaganda from the braintrust…these guys should sell timeshares.

I can believe UTOPIA might have suggested this to the UTA in Dec….BUT I’m not sure how clear that was made…or why the UTA has the obligation to go public in Dec.?

Why didn’t UTOPIA go public….suggesting the UTA is doing wrong by not going public back then is crazy. There is NO question UTOPIA should have been the one going public and NOT the UTA.

As it relates to the number of installs, you must remember that the subscriber numbers could come in part from adding already installed subscribers…if the reports of the Traverse Mountain FTTH subdivision moving to UTOPIA are true, that could explain part of those budgeted subscribers and the very low revenue per subscriber budgeted. But I would guess there are only a few thousand homes in that development (2000-3000??) so the questions on UTOPIA’s ability to scale to do a large number of installs may still be valid.

Given the lack of install money in the budget (suggesting customers might pay for the install) and their belief in creating Special Assessment Areas, I’m going to suggest that making the sales will be much more difficult than doing the installs.

Given this is speculation, but is it possible that Utopia is borrowing against subscriber revenue for customer installations? I know that a model similar to this was suggested/hinted at by Utopia personal before, It would also explain the low revenue increase give the customer increase. Also the interest reported with the SAO office of $15 million would lend creditably to this theory given that 5-6% interest on their $189~ million bond should be closer to the range of $12-13~ million.

Eather way I know Utopia has talked about using a credit line for customer installations before, I wonder if this is information that could be “extracted” with a GRAMA request.

sure i think their are many who would roll Utopia a credit line that was backed by the first 2 years of subscriber revenue for the purpose of performing subscriber installs, its relatively low risk. Utopia’s bonds are covered by the tax payers not Utopia’s own revenue. A credit line is a very reasonable way to pay for installs but would “hide” Utopia’s real revenue for a period of time.

Given if this has happened I would feel a bit uneasy about it, something like this should be reported. a credit line like this would have an interest rate in the range of 10-14% and would account for the rather large $15million in interest that Utopia reported. Given of course this entire line of thought is pure speculation.

I guess that’s as good (or better) a guess than my thoughts that the install was funded by the SAA model (or so variation of customers paying for the install in exchange for a lower monthly rate), or the addition of subs with little revenue due to the Traverse Mountain sub-division addition.

It could of course be any one or more, a combination of all or something completely different we have not even considered.

I’m sure they are trying to think outside the box and that is good!

Given their current situation, solutions will be hard to come by. It appears the cities are between a rock and a hard place with no good options.